One of the very first metals ever taken out of the earth and used was copper. As early as 8000 B.C., it was used in coins and ornaments. By 5000 B.C., it was used to form tools that helped mankind emerge out of the Stone Age. Since that time, the metal has become ubiquitous, as copper is used now in building materials, power generation, plumbing, money, and even in electric vehicles.

What is the copper industry?

The mining industry extracts copper ore from the earth, and prepares it to be used as a feedstock to produce copper-based products. Copper is found in large deposits. In its most basic form, copper ore comes in two types: sulfide ores and oxide ores. Each type requires a different method of extraction and processing by the copper industry. Further, if the ore is near the surface of the Earth, it is mined in an open pit, which is the most common extraction technique. However, if the copper ore is too deep for an open pit, mining companies will use an underground mining technique to extract the metal, though this is a more-expensive method.

How big is the copper industry?

Chile leads the world in copper production. In 2013, the country produced 5.7 million tons of copper. That's a lot of copper, as it represents 20% of the country's GDP, and 60% of its exports. Next on the list is China, which produced 1.65 million tons of copper in 2013. Incidentally, China is also the world's largest consumer of copper, and it continues to import a considerable amount of the metal. Finishing off the top five copper producers are Peru (1.3 million tons), the U.S. (1.22 million tons), and Australia (990,000 tons).

How does the copper industry work? 

The Earth holds an incredible amount of copper. In just the top kilometer of the Earth's crust, there is estimated to be 5 million years' worth of copper at the current rate of extraction. That being said, most of that copper isn't economically viable to produce with present day prices and technology. It's the tiny sliver of economically viable copper that the copper industry is targeting. Estimates are that somewhere between 24 to 60 years' worth of these easy-to-mine copper reserves remain.

Open pit copper mine in Utah. Photo credit: Flickr user Mike Fischer.

World-class copper deposits are even more rare. However, once a large-scale copper resource is found, its owner can expand mining operations around the reserves, and grow copper production at a much cheaper cost than developing a new resource. That's despite the fact that these expansions can cost several billions of dollars.

Because copper is a commodity business, low-cost and expandable copper deposits are a big competitive advantage in the industry. One of the important factors that impacts the copper industry's cost structure is the fact that copper isn't usually the only commodity produced from a mine. Gold, silver, cobalt, and molybdenum are sometimes found along with copper and, in many mines, these are by-products of copper production. However, the costs associated with the production of these by-product commodities actually offset the cost of copper production through what are known as by-product credits. The larger the credit, the lower the cost for producing copper at a mine. 

In terms of production costs, copper mining requires a lot of energy. In fact, for Freeport-McMoRan, which is the world's second-largest copper producer, energy represents 20% of its costs. Because of this, access to inexpensive electricity, as well as energy-efficient operations, are both a big cost advantage to copper producers. In addition to that, mining is a labor-intensive industry, so labor is a big cost for the mining industry, in general. Further, work stoppages due to labor disputes can have a big impact on operations, and increase a miner's costs.

What drives the copper industry?

Copper is among the most versatile metals on the planet. But a bulk of it is used to make building materials like electrical wires, plumbing pipes, and even roofs. In the U.S., about half of copper used is in building materials. After that, about a quarter is used in electric and electronic products, one-tenth in transportation equipment, and about one-tenth for consumer and general products.

Copper fittings. Photo credit: Flickr user Tony Hisgett.

Copper is also used in more ways than ever before. For example, the U.S. military is looking to replace its lead bullets with copper bullets. The reason behind the shift is because a lead bullet, when spent, can have a negative impact on the water supply and food chain, while a copper bullet's environmental impact would be muted.

Another emerging use of copper is in hybrid vehicles. An average gas-powered car uses about 44 pounds of copper, as it is an essential component in the motors, wires, brakes, and bearings. But copper is even more important to hybrid vehicles, as these contain nearly 100 pounds of copper.

That being said, what's really driving the copper industry these days are emerging markets, like China. The country's copper-intensive construction industry alone accounts for 35%-40% of worldwide copper consumption. Because of that, its economic growth will really be a key driver for the copper industry going forward.